TO THE MEMBERS
COMFORT INTECH LIMITED
Report on the Audit of the Standalone Financial Statements
We have audited the accompanying standalone financial statements ofComfort Intech Limited ("the Company") which comprise the Balance Sheet as atMarch 312021 the Statement of Profit and Loss statement of changes in Equity and theStatement of Cash Flows for the year ended on that date and notes to the financialstatements including a summary of the significant accounting policies and otherexplanatory information (hereinafter referred to as "the financial statements").
In our opinion and to the best of our information and according to theexplanations given to us except for the effects of the matter described in Basis forQualified Opinion section of our report the aforesaid standalone financial statementsgive the information required by the Companies Act 2013 ("the Act") in themanner so required and give a true and fair view in conformity with the Indian AccountingStandards and other accounting principles generally accepted in India of the state ofaffairs of the Company as at March 312021 the loss changes in equity and its cash flowsfor the year ended on that date.
Basis for Qualified Opinion
The Company has not provided for defined benefit obligation in thenature of gratuity based on the requirement of Ind AS 19 i.e. "EmployeeBenefit" which requires defined benefit obligation to be recognised based onactuarial valuation basis. In absence of valuation we are unable to quantify the impact ofabove on the net profit for the year and liabilities as on reporting date.
We conducted our audit of the financial statements in accordance withthe Standards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Company in accordance with the Code of Ethics issued by the Instituteof Chartered Accountants of India (ICAI) together with the ethical requirements that arerelevant to our audit of the financial statements under the provisions of the Act and theRules made thereunder and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for ourqualified opinion on the financial statements.
Emphasis of Matter
a) We draw attention to Note No 32 to the financial results regardingthe Company not being able to recover a loan from the legal heir of a borrower givenagainst security of shares of a listed entity (Pledge Security) the balance as on 31stMarch 2021 is Rs.19.37 Crores. Consequently the Company has invoked the said pledgeSecurity. Major quantity of the said invoked pledge security has been freezed by astatutory authority on account of legal disputed matter of our company and hence companyis unable to sell the same to recover the loan and interest thereon. Management isconfident of freeze getting lifted on pledge security as the said pledge security is notpart of the dispute. The Pledge security is infrequently traded on the stock exchanges.The quoted Market value of Pledge Security is Rs. 18.61 Crores as on the date of approvalof financial results. However management is of the view that quoted price of pledgesecurity cannot be taken as fair value as even after considering the 50% investmentcompany discount the Fair Value based on latest unaudited Financial Results of thelisted company whose shares are pledge as security is sufficient to cover the carryingvalue of loan. Management therefore has decided that presently no impairment lossallowance is required for shortfall in pledge security value.
b) We further draw attention to Note 33 to the financial statementswherein it is stated that due to the outbreak of COVID-19 pandemic across the globe and inIndia there is a significant decline and volatility in the global and Indian financial& commodity markets and slowdown in the economic activities. The management of theCompany have based on current available information determined the carrying value ofvarious financial assets after considering the potential macro-economic impact and allavailable internal and external information up to the date of approval of these financialresults. The impact of the global health pandemic may be different from that estimated asat the date of approval of these financial statements and the Company will continue toclosely monitor any material changes to future economic conditions.
Our report is not modified in respect of the above matters.
Key Audit Matters
Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the financial statements of the current period.These matters were addressed in the context of our audit of the financial statements as awhole and in forming our opinion thereon and we do not provide a separate opinion onthese matters. We have determined the matters described below to be the key audit mattersto be communicated in our report.
We have determined the matters described below to be the key auditmatters to be communicated in our report. We have fulfilled the responsibilities describedin the Auditor's responsibilities for the audit of the Standalone Financial Statementssection of our report including in relation to these matters. Accordingly our auditincluded the performance of procedures designed to respond to our assessment of the risksof material misstatement of the Standalone Financial Statements. The results of our auditprocedures including the procedures performed to address the matters below provide thebasis for our audit opinion on the accompanying Standalone Financial Statements.
|Key Audit Matters ||How our audit addressed the key audit matter |
|A. Impairment of Financial Asset due to Non Recoverability of Loan from the legal heir of one of the borrowers || |
|The Company is not being able to recover a loan from the legal heir of a borrower given against security of shares of a listed entity (Pledge Security) and the balance as on 31st March 2021 is Rs.19.37 Crores. ||1. We read and assessed the Company's accounting policies for impairment of financial assets and their compliance with Ind AS 109 |
|Consequently the Company has invoked the said pledge Security. ||2. We evaluated the management's reasonableness for not making provision in the books of accounts for the shortfall in the value of security. |
|Major quantity of the said invoked pledge security has been freezed by a statutory authority on account of legal disputed matter of our company and hence company is unable to sell the same to recover the loan and interest thereon. Management is confident of freeze getting lifted on pledge security as the said pledge security is not part of the dispute. ||3. We have further assessed the financial statements of the company whose shares are pledged. |
|The Pledge security is infrequently traded on the stock exchanges. || |
|The quoted Market value of Pledge Security is Rs. 18.61 Crores as on the date of approval of financial results. || |
|However management is of the view that quoted price of pledge security cannot be taken as fair value as even after considering the 50% investment company discount the Fair Value based on latest unaudited Financial Results of the listed company whose shares are pledge as security is sufficient to cover the carrying value of loan. || |
|Management therefore has decided that presently no impairment loss allowance is required for shortfall in pledge security value. || |
|A. Amount advanced to Associate Company || |
|As per the Agreement dated 26th June 2018 the Company has entered into sub lease agreement with its Associate Company for Production of Indian made foreign Liquor brands owned by the company. ||1. Examined the agreement entered by the company with the associate company. |
|As per the agreement company has agreed to sanction business advance limit of upto Rs. 17 Crore to the associate for smooth running of the factory retirement of its liabilities and for upgradation of plant infrastructure and machinery. ||2. Discussion with the management for understanding the demand for the company's brand of Indian made foreign liquor and utilization of capacity of associate by company and other parties by way of sub-lease |
|As per the terms mentioned in the agreement certain portion of the bottling charges payable by the company to the associate shall be adjusted against the said advance wef from 1st April 2021 as per the quantum agreed between the company and associate and the said advance has been secured. ||3. Analysed the past year capacity utilization and sales achieved by the company for the said brands |
|The Outstanding balance of the said advance is Rs. 11.35 Crores as on 31st March 2021. ||4. Studied the management projection towards the cash flow that would be generated from Bottling contracts of Associate from which advances will get recovered. |
| ||5. Review of the document wherein associate has given its assets as collateral for the loan facility availed by the company. |
| ||6. Analysed the Net Asset Value of the associate considering the Fair Value of assets. |
Responsibilities of Management for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these financial statementsthat give a true and fair view of the financial position financial performance changesin equity and cash flows of the Company in accordance with the accounting principlesgenerally accepted in India including the Accounting Standards specified under Section133 of The Act read with Rule 7 of the Companies (Accounts) Rules 2014. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
In preparing the standalone financial statements management isresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless management either intends to liquidate the Company or to ceaseoperations or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing thecompany's financial reporting process.
Auditor's Responsibilities for the Audit of the StandaloneFinancial Statements
Our objectives are to obtain reasonable assurance about whether thestandalone financial statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditor's report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of thestandalone financial statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.
Obtain an understanding of internal financial controls relevantto the audit in order to design audit procedures that are appropriate in thecircumstances. Under section 143(3)(i) of the Act we are also responsible for expressingour opinion on whether the Company has adequate internal financial controls system inplace and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of thestandalone financial statements including the disclosures and whether the standalonefinancial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditor's Report) Order 2016 issues bythe Central Government of India in terms of sub section (11) of the section 143 of theCompanies Act 2016 we give in the Annexure A a statement on the matters specified inparagraphs 3 and 4 of the Order to the extent applicable.
As required by Section 143(3) of the Act based on our audit we reportthat:
a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.
b) In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss including theStatement of Cash Flow dealt with by this Report are in agreement with the relevant booksof account.
d) In our opinion the aforesaid financial statements comply with theAccounting standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014 except as described in the Basis for Qualified Opinionparagraph.
e) On the basis of the written representations received from thedirectors as on March 31 2021 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2021 from being appointed as a director in termsof Section 164 (2) of the Act.
f) With respect to the adequacy of the internal financial controls overfinancial reporting of the Company and the operating effectiveness of such controls referto our separate Report in "Annexure B".
g) With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 inour opinion and to the best of our information and according to the explanations given tous:
I. The Company has disclosed the impact of pending litigations on itsfinancial statements. Refer Note 30 to financial statements.
II. According to the information given to us the company has notentered into any long-term contracts including derivative contracts.
III. There has been no delay in transferring any amount to betransferred to Investor Education and Protection fund by the Company except amount ofRs.150287/- pertaining to dividend paid for FY 2012-13 due to error in uploading therequisite form on the MCA website. The Company has already lodged complaint on the MCAwebsite and also escalated the issue via email. The issue has not yet been resolved as onthe date of signing the financial statements.
ANNEXURE A TO AUDITORS'S REPORT
On the basis of such checks as we considered appropriate and in termsof information and explanations given to us we state that:
1. a. The Company has generally maintained proper records of fixedassets showing full particulars including quantitative details and situation of fixedassets.
b. According to information given to us fixed assets have beenphysically verified by the management at reasonable intervals and no material discrepancywas noticed on such verification.
c. According to the information and explanation given to us and on thebasis of records furnished before to us the title deeds/ownership documents of theimmovable properties are held in the name of the company.
2. a. According to information and explanation given to us by themanagement and records furnished before us
Inventory of Finished Good Raw Material Packing Material and underconstruction property have been physically verified by the management at reasonableintervals. In our opinion and on the basis of our examination of the records the Companyis generally maintaining proper records of its inventories. No material discrepancy wasnoticed on physical verification of inventory by the management.
3. According to the information and explanation given to us and on thebasis of records furnished before us company has granted unsecured loans to one partycovered in the register maintained under section 189 of the Companies Act 2013.
a. The terms and conditions of the grant of such loan are notprejudicial to the interest of the company.
b. According to information and explanation given to us the loan isrepayable on demand and has been repaid as and when demanded. Interest has been served ona regular basis.
c. Loan has been repaid as and when demanded and hence there is nooverdue amount.
4. According to the information and explanations given to us and on thebasis of our examination of the books of account the Company has complied with theprovisions of section 185 and 186 of the Companies Act 2013 with respect to theguarantees and securities given. However the company has not given any given any loan ormade any investment under section 185 and 186 of the Companies Act 2013.
5. According to the information and explanations given to us and on thebasis of our examination of the books of account the Company has not accepted anydeposits within the meaning of section 73 to 76 from public during the year. Accordinglyclause 3(v) of Companies (Auditor's Report) Order 2016 is not applicable.
6. According to the information and explanation given to us the Companyis not required to maintain cost records as specified under section 148 sub-section (1) ofthe Companies Act 2013. Accordingly clause 3(vi) of Companies (Auditor's Report) Order2016 is not applicable.
7. a. The company is generally regular in depositing undisputedstatutory dues including Provident Fund Employees'
State Insurance Income Tax Sales Tax Goods and Service Tax Cess andany other statutory dues except delays in the payment of Tax Deducted at Source Goods andService Tax. No undisputed statutory dues as stated above is outstanding as at 31st Marchfor more than six months from the date they become payable.
b. According to information and explanation given to us there are nodisputed statutory dues relating to Income Tax Sales Tax Custom Duty Excise Duty CessGoods and Service Tax or any other statute except as stated below:
|Name of statute ||Nature of dues ||Year(s) to which it pertains ||Amount Not Paid (Rs. in Lacs) ||Forum where dispute is pending |
|Income Tax Act1961 ||Income Tax Demand ||A.Y.2011-12 ||220.38 Lakhs ||Commissioner Of Income Tax (Appeals) |
|Income Tax Act1961 ||Income Tax Demand ||A.Y.2012-13 ||12.08 Lakhs ||Commissioner Of Income Tax (Appeals) |
|Income Tax Act1961 ||Income Tax Demand ||2016-17 ||3.21 Lakhs ||Rectification yet to be filed with the Assessing Officer. Refer Note 30 to the financial statements |
|Income Tax Act1961 ||Income Tax Demand ||2018-19 ||23.98 Lakhs ||Rectification has been filed with the Assessing Officer. Refer Note 30 to financial statements |
8. According to the information and explanation given to us and recordsexamined by us the Company has not defaulted in repayment of dues to any financialinstitution or bank as at the Balance Sheet date.
9. According to information and explanation given to us and recordsexamined by us the company has neither raised any money by way of public offers norraised any term loan during the year. Accordingly Clause 3(ix) of Companies (Auditor'sReport) Order 2016 is not applicable.
10. During the course of our examination of the books and records ofthe company carried out in accordance with generally accepted auditing practices inIndia and according to the information and explanation given to us we have neither comeacross any instance of fraud on or by the company noticed or reported by its officers oremployees during the year nor we have been informed of such instances by the management.
11. According to the information and explanations given to us and basedon our examination of the records of the Company the Company has paid/provided managerialremuneration in accordance with the requisite approvals mandated by the provisions of theSection 197 read with Schedule V of the Companies Act 2013.
12. In our opinion and according to the information and explanationsgiven to us the Company is not a Nidhi Company. According the clause 3(xii) of Companies(Auditor's Report) Order 2016 is not applicable.
13. According to the information and explanation provided to us andbased on our examination of the records of the Company the transaction with the relatedparties are in compliance with section 177 and 188 of Companies Act 2013 where applicableand the details of such transactions have been disclosed in financial statements asrequired by the applicable Accounting Standards.
14. According to the information and explanation provide to us andbased on our examination of the records of the company the company has not made anypreferential allotment or private placement of shares or fully or partly convertibledebentures during the year. Accordingly the clause 3(xiv) of the Companies (Auditor'sReport) Order 2016 is not applicable.
15. According to the information and explanation provided to us andbased on our examination of the records of the Company the Company has not entered intoany non-cash transaction with directors or persons connected with him. Accordingly clause3(xv) of the Companies (Auditor Report) Order 2016 is not applicable.
16. Considering the asset and income pattern the company is notrequire to hold certificate of registration under 45-IA of the Reserve Bank of India Act1934.
ANNEXURE B TO AUDITORS'S REPORT
Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
We have audited the internal financial controls over financialreporting of Comfort Intech Limited ("the Company") as of March 31 2021 inconjunction with our audit of the standalone Ind AS financial statements of the Companyfor the year ended on that date.
Management's Responsibility for internal financial controls
The Company's management is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India ('ICAI').These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internalfinancial controls over financial reporting based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") and the Standards on Auditing issued by ICAIand deemed to be prescribed under section 143(10) of the Companies Act 2013 to theextent applicable to an audit of internal financial controls both applicable to an auditof Internal Financial Controls and both issued by the Institute of Chartered Accountantsof India. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls system over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk. Theprocedures selected depend on the auditor's judgment including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internal financialcontrols system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting.
A company's internal financial control over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial control overfinancial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany;
(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directors of thecompany; and
(3) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition use or disposition of the company's assets thatcould have a material effect on the financial statements.
Inherent Limitations of internal Financial Controls Over FinancialReporting
Because of the inherent limitations of internal financial controls overfinancial reporting including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls overfinancial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequateinternal financial controls system over financial reporting and such internal financialcontrols over financial reporting were operating effectively as at March 312021 based onthe internal control over financial reporting criteria established by the Companyconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the ICAI.
|For A. R. SODHA & Co. |
|Chartered Accountant |
|FRN 110324W |
|A. R. sodha |
|M. No 31878 |
|Place: Mumbai |
|Date: 21st June 2021 |
|UDIN: 21031878AAAADN6136 |